Location, Location, Location: Why Cost of Living Matters So Much to Your Financial Health

Yesterday, I gave a presentation on my “Be Your Own CFO” concept to subscribers of Leo Babauta’s Sea Change program. For an hour, I talked about how (and why) to treat your personal finances as if you were managing a small business.

As always, one of the key components of my message was that people ought to do what they can to save money on the big stuff. By making smart choices in just three areas — housing, transportation, and income — you can achieve outstanding personal profit with minimal effort. That is, you can create a huge gap between your earning and spending if you’ll take steps to reduce your housing costs, trim your transportation expense, and increase your income.

Obviously, these things are easier said than done. If you’ve already bought a large, expensive house in suburbia, it’s tough to simply say, “I’m out of here.” For one, it takes time to sell your place and move into something smaller (and cheaper). For another, if you’re accustomed to a certain lifestyle, the transition to something more minimal can be shocking at first. (Although, from the people I’ve talked to, once the transition is made, it’s easy to maintain the new modest lifestyle.)

What was different about yesterday’s presentation, though, was the role that cost of living played in my thoughts — if not my actual delivery.

Right now, Kim and I are stranded in rural South Dakota. While driving from the Badlands to De Smet (real-life site of Laura Ingalls Wilder’s “little town on the prairie”), our RV engine blew up. For the past week, we’ve been stuck in Plankinton (population 707) while we wait for a new engine to arrive and be installed.

I won’t pretend that Plankinton is paradise. It’s hot and humid here. There’s little to do besides sit and drink beer with the locals during the evening. (Which is fun, don’t get me wrong.) There aren’t a lot of job opportunities. The socio-political vibe doesn’t match our own.

What Plankinton does have, however, is cheap prices. This morning, for instance, I paid $10.60 for a fancy men’s haircut. At home in Portland, I pay $28 for the same fancy haircut. Six weeks ago, I paid $30 for the same cut in Fort Collins, Colorado. In Santa Barbara, California, I paid $50 or $60 for the same fancy cut.

Gas is cheaper here too. So is food. So is beer and whisky. So are movies. So is just about everything, including housing. Housing prices follow a similar pattern to the haircut prices I mentioned above. A $280,000 home in Portland might go for $300,000 in Fort Collins and $500k to $600k in Santa Barbara. Here in South Dakota, that same home would cost about $106,000.

Cost of living differences can be huge from one country to another, from one state to another, and from one city to another. In large cities, there are even differences between neighborhoods. (Groceries are more expensive in Portland’s posh West Hills than in low-rent Oak Grove, for instance.)

For fun, take a look at CNN’s cost-of-living calculator, which will allow you to compare expenses from one city to another. For instance, here’s the difference between home and here:

Cost of living comparison
My money would last longer if I wanted to live in South Dakota. But I don’t.

The lesson here? If you truly want to achieve a Big Win on your housing costs, it pays to expand your search, to take into account cost of living. If you have a fixed budget, you’ll get more bang for your buck by buying a house in Oklahoma City or Sioux Falls than by purchasing in San Francisco or Seattle. If, like me, your work is location independent, it makes much more sense to live in Omaha, Nebraska than New York City. Your income is the same in both places; but in Omaha, your get much more for your money.

Now, obviously there’s more to consider in a decision like this than pure price. As I always say, money management is more about mindset than math. We are emotional creatures, and we don’t make financial decisions based purely on the numbers. When you choose a place to live, you do so because of the climate, the politics, and the people. You want to live close to friends and family. You want a nice school district. You want people who think and act the same way you do. For those reasons (and others), South Dakota might not be a good choice for you.

But I believe you should take cost of living into account when deciding where to live. Housing is far and away the largest piece of the average American budget, roughly one-third of the typical household spending. The best way to cut your costs (and, therefor, boost your profit/savings) is to reduce how much you spend on housing. And the first step in reducing your housing expense is to choose a cheap place to live.

Note: Other ways to make the most of your housing budget? Live close to where you work so that you can walk, bike, or take the bus. (I don’t think I’ll ever live anywhere else that I cannot walk for my daily errands and my work. The health and financial benefits are just too great to live somewhere that I have to drive all the time.) Choose to buy as little home as you can get away with rather than the commonly cited “buy as much home as you can afford”. The latter is self-serving advice from real-estate agents and mortgage brokers. You don’t need a big place. You just need a comfortable place.

Announcing Get Rich Slowly, My New 52-Week Course to Mastering Money and Achieving Financial Independence

More Than Money is in the middle of a year-long exploration of fear, flow, and freedom. Every Monday, I’m posting an article from what was supposed to be an ebook bout personal and financial freedom. That material wasn’t right for the project, but it’s right for here.

And what was that project? At last, I can tell you.

For nearly a year, I’ve been working to put together a course meant to help people master their money. Finally, it’s finished and ready for public consumption.

Get Rich Slowly: The Course

Get Rich Slowly: The Course is designed to help people of all levels take better control of their financial lives. If you’re in debt, it can help you get out of debt. If you’re building wealth, it can help you build wealth. And if you’re well on your way to Financial Independence, the Get Rich Slowly course can help you plot your course to freedom.

In the intro to Be Your Own CFO, the 120-page guide that anchors the course, I describe my mission like this:

This guide is different than most of the personal finance books and blogs you’ve read. Instead of assuming you’re a victim of circumstance, I assume that you are the master of your own fate.

Sure, you’re a part of the overall economy and subject to both lucky and unlucky breaks, but ultimately you’re in charge. Your circumstances may not be your fault, but they’re your responsibility. You are the Chief Financial Officer of your own life.

As I mentioned, the course is centered around the 120-page guide called Be Your Own CFO, which took me months to write. (And this year’s content at jdroth.com is built on stuff that didn’t make it into the final product.) But the course contains much more, including:

  • A year-long email series packed with both practical tips and financial philosophy. Each week, I’ll send you a short message meant to motivate you further on the path to money mastery.
  • Eighteen audio interviews (and transcripts) with folks like Mr. Money Mustache, Ramit Sethi, Jean Chatzky, and many many more.
  • An entire built-from-scratch website filled with supporting material. This website is pretty basic at the moment, but will grow much more robust with time.
  • And, of course, a whole bunch of downloadable material related to the ideas in the course, including PDF worksheets, a handful of spreadsheets (man, those were tough to produce!), and an entire mini-guide on how to use a Roth IRA.

I’m very proud of this Get Rich Slowly course. It feels like a culmination of my life’s work, you know? Everything I know about personal finance has been packed inside, and I’ve done my best to make the information motivational and accessible.

And I’m grateful that the early reviews of the material have been positive. For instance, Productive Flourishing wrote

Be Your Own CFO deserves to be one of the five books on personal finance on your shelf, even if that shelf is digital…The two additional resources on Roth IRAs and negotiating your salary, if applied, are worth the price of the whole product alone.”

I’m glad that I’m finally finished with this project and it’s out in the wild. For one, that means I can relax. But for another, it means I can spend more time around here, writing about meaning and happiness, the two topics that actually feel most important to me. Money is related, sure. But money is secondary. It’s personal well-being that we’re all striving to achieve.

For those of you who are curious, here’s a sneak peek inside the Be Your Own CFO guide, including the introduction and table of contents:

Be Your Own CFO
You can read more about the GRS course here.

What are you waiting for? You should check out the Get Rich Slowly course. Let me know what you think, won’t you?

How to Retire Early

The best way to retire early is to be a non-conformistEvery morning when I get out of bed, I pour a cup of coffee and sit down at my computer. While I wait to wake up, I browse my favorite websites. This morning, as I was browsing Ask Metafilter, I stumbled upon an intriguing question. A user named House of Leaves and Grass wrote:

I’m turning 30 this year. My husband and I are discussing a retirement plan that includes a farm in South Carolina. Can you recommend some resources (blogs, persons willing to email, books, etc) so that we can make an informed decision about whether to do this and what sort of financial planning we’ll have to do to make it happen?

Talk about something that’s right in my wheelhouse! For years, I had a similar dream. I wanted to retire with Kris to a farm in the country where we could raise goats and grapes and filberts and corn and more. That’s not how things worked out, of course, but I still remember reading about this (idealized) lifestyle for hours at a time. And, of course, I’ve been thinking a lot about early retirement lately.

As I waited for my coffee to kick in, I dashed off an answer to this would-be farmer. Here’s an edited version of my response.

First, be open to the idea that your priorities may change. That is, plan for this future and make it your mission right now, but be aware that it’s very hard to predict what the Future You will actually want.

Countryside magazine is awesomeI found that Countryside magazine was one of the best ways to get a feel for what this sort of lifestyle really entailed. This publication is largely written by readers, all of whom are into the farming/homesteading lifestyle. They share their experiences and expertise with real-world situations. It’s great stuff.

As for the financial planning stuff, I can address that too. (I’m a personal-finance writer by trade.)

I’m not going to go deep into the theory behind any of this stuff, but my advice to you is:

Begin saving as much as you can as soon as you can. The two factors that make the biggest difference in how much you’ll have saved in retirement (or at any point, really) are how much you’ve contributed and how long you’ve been contributing. Your investment returns do contribute to the final number, but they’re not nearly as important as saving early and often.

What is early? Well, now. Start saving now. Not much more to say about that.

How much should you save? Most traditional advice is to save ten or twenty percent of your income, and for years I’ve spouted that line too. In the past few months, however, I’ve come to realize that this advice is inadequate. If you save just ten or twenty percent of your income, it’ll take you forty years to have enough accumulated to retire (or to pursue whatever goal you have).

Instead, aim to save fifty percent of your income. Seventy percent is even better. If you can save at this rate, you’ll be retiring to your farm in South Carolina in ten or fifteen years instead of forty. The math behind this is shockingly simple, yet most people miss it. And most people complain that they could never save fifty or seventy percent of their income. Meanwhile, there are plenty of people who do manage this amazing feat. These industrious folks quietly retire at age 35 while their peers continue to say that it can’t be done (all while buying into the modern adult lifestyle).

How do you achieve such a high saving rate? There are only two things you can do to boost it: spend less or earn more. You should do both. When most people try to cut spending, they focus on the small, easy stuff like clipping coupons. That’s great — and you should definitely do that — but you’ll have a greater impact on your bottom line if you go for big wins. Housing and transportation are the biggest expenses (by far) in the budgets of most Americans. If instead of spending the average 33% on housing, you spend (say) just 15% of your take-home pay on housing, you’ll save a ton. And if you can live without a car (or with a beater), you’ll save a second ton. Meanwhile, finding ways to boost your income will also accelerate your savings.

Where do you put these buckets of money you’re now earning? Tuck it all into a low-cost stock-market index fund, such as VTSMX or FSTMX. Maybe add a total bond index fund too. Resist the urge to own more. Resist the urge to move money in and out of the market. Ignore the financial news. Ignore what your friends are doing with their investments. Just funnel your money into these funds and stand pat for the ten or fifteen or twenty years that you’re accumulating cash to afford your farm.

If you do these things — slash housing and transportation expenses, boost income, invest in index funds and leave the money alone — you should be able to build a sizable nest egg in half the time you’re planning to spend on the project. During that time, keep dreaming the dream and building your skillbase.

If you want moral support while trying to save fifty or seventy percent of your income (your friends and family will think you’re crazy and say that it can’t be done), read Mr. Money Mustache, Early Retirement Extreme, and Afford Anything. I’d recommend my own blog too (Get Rich Slowly), but sadly the focus isn’t on this sort of financial behavior — it’s more geared toward those in the modern adult lifestyle.

How I Found Freedom in an Unfree World

As for books? Check out Early Retirement Extreme, Your Money or Your Life, Cashing in on the American Dream, and How I Found Freedom in an Unfree World. (The latter isn’t about money but philosophy. Ignore the libertarian politics and focus on the personal behavior stuff.)

There. You’ve just received the sum of the financial wisdom I’ve accumulated over the past decade of reading and writing about personal finance. Put it to use, and you’ll have your farm sooner than you think!

I don’t know whether this Ask Metafilter user will put my advice into practice, but I hope she does. Regardless, it was a hell of a lot of fun to encapsulate my current financial world view into just a few hundred words. This is what I’ve spent the last four months writing about for my ebook. And here I’ve summarized everything in a matter of minutes.

Ecuador 2013: A Chautauqua on Wealth and Happiness

You know how sometimes peak life experiences kind of creep on you when you’re least expecting them? Well, that just happened to me.

For the past week, I’ve been part of the first chautauqua produced by Cheryl Reed of Above the Clouds Retreats. I joined fellow financial bloggers Mr. Money Mustache (a.k.a. Pete) and jlcollinsnh (a.k.a. Jim) to present our philosophies to an enthusiastic group of 22 participants, most of whom were women and most of whom had reached (or were well on their way to) Financial Independence.

Including Cheryl’s husband, Rich, we had 27 in our group. You know how there’s usually one or two bad eggs in any group that size? Well, that didn’t happen to us. In fact, this is probably the best small group I’ve ever had the privilege to be a part of. The participants were universally intelligent and friendly and supportive and fun. “I haven’t laughed so much in years,” one woman said at the end of the week. I haven’t either.

Note: I’ve uploaded the PowerPoint slides for my presentation. I’ll post a written version soon (maybe on Pete’s blog, if he’ll take it). Plus, I plan to share a summary of the various financial advice from the chautauqua at Get Rich Slowly within the next couple of weeks. If you want more info right now, check out Mr. Money Mustache’s summary of the week.

Between me, Rich, and Mr. Money Mustache, we took thousands of photos during the ten days it took to produce and stage this retreat. I’ve culled these to 165 favorites. But since that’s far too many to ask you to view, I’m going to thin that even further. Here are 20 of the photos that I feel best capture our shared experience. (Click a photo to view a larger version.)

Morning at Cheryl’s farm: Cheryl, Pete, J.D., and Jim plan for the week [photo by Rich]

The “profits” from the week will help families like this in Santa Elena [photo by Rich]

Sunset in Santa Elena — Cheryl takes the dogs for a walk [photo by J.D.]

Pete and Amy O. look on raptly as J.D. shares some brilliant insight [photo by Rich]

Pete shares his Mustachian vision for happiness and lifestyle design [photo by J.D.]

Jim and Val prioritize their passions during Cheryl’s presentation [photo by Rich]

Colleen endures smoke and fire (and plenty of spit) during a shamanic cleansing [photo by J.D.]

During a day trip to Otavalo, street performers serenade the group [photo by Rich]

At a local orphanage, kids scramble for candy from a piñata [photo by Pete]

The group watches a folkloric dance group at Hacienda Cusin [photo by J.D.]

Another night of Story Time with Uncle Jesse — “That reminds me of the time…” [photo by J.D.]

Anita and Caitlin enjoy the company of the adorable (and annoying) cat [photo by J.D.]

Pete hosts the first of many enjoyable evenings at the hacienda [photo by ??]

Amy O. and J.D. bust a gut as Colleen slams a Mustachian Rosé [photo by Pete]

The entire group flashes the Mustachian Salute [photo by J.D.]

“La mitad del mundo!” — J.D. at the equator [photo by Amy F.]

Marla, Colleen, and Jason in Quito’s Plaza San Francisco at dusk [photo by J.D.]

J.D., Colleen, Amy O., Marla, and Val toast the end of a wonderful week [photo by Pete]

Shyam and Jesse watch as Carol is serenaded for her birthday [photo by J.D.]

Marla and Val posing with the handsome and dapper doorman [photo by J.D.]

One thousand thanks to Amy, Amy, Amy, and Tom; Menon and Shyam; Nathan and Caitlin; Cathy and John; Jason, Jesse, and Jen; Carol, Karl, and Colleen; Dave and Ann; Lise, Val, Anita, and the every-charming Marla. All y’all made this week amazing. I spent more time with some folks than others — Colleen and Amy O., for instance — but I enjoyed the conversations I had with everyone.

And, of course, thanks to my colleagues. Jim, Rich, Cheryl, and Pete — it was an honor to have been a part of this. Thank you for asking me to share the experience. Let’s do it again next year!

Now, however, I have a brief lull before starting the next leg of my expedition to Ecuador. I’ll spend two more nights at Hotel Ambassador in Quito’s “gringo-landia” — I’m listening to sappy Spanish love songs in the lobby right now — but on Monday, I’ll join a small group headed to the Galapagos Islands. It’s going to be great!

Then, exactly a week from right now, I’ll hop a shuttle the airport to head home. That too will be great. As much as I loved this chautauqua, I love Kim more. I’m eager to return to our home so that we can resume a routine together, and so that we can grow and learn together…

Photos of giant tortoises coming soon! (Plus, underwater snorkeling photos taken with my new waterproof camera.) Stay tuned, my friends.

The Gift Economy and Social Capital

On Friday, Kim and I had dinner with Jason and Kyra Bussanich. Jason is a chiropractor in Lake Oswego and his wife Kyra owns a popular gluten-free bakery. (Kyra also won an episode of Food Network’s “Cupcake Wars”.)

Over dinner, we touched briefly on the notion of a gift economy. Wikipedia has a great definition of this concept:

A gift economy is a mode of exchange where valuables are given without an explicit agreement for immediate or future rewards. In contrast to a barter economy or a market economy, social norms and custom govern gift exchange, rather than an explicit exchange of goods or services for money or some other commodity. Gift exchange is frequently “embedded” in political, kin, or religious institutions.

The next day, Kim and I joined Kyra and her mother to see the Dalai Lama speak at an environmental summit here in Portland. At one point, the moderator posed this question to the panelists: “On some level, the human experience is all about consumption. Life lives by consuming life. But how do we moderate our consumption to reasonable levels?” All of the answers seemed very similar:

  • Oregon governor John Kitzhaber said the challenge is to build an economic system that is not built on the assumption of unlimited growth and unlimited consumption. He pointed out (as I often have) that beyond a certain level, increased income does not increase happiness. Kitzhaber also stressed the importance of social capital, the mutual goodwill we create when we interact with our friends and neighbors.
  • Environmental activist David Suzuki said that because of the effects of the Great Depression, “The engine of our economy runs on consumption, and we don’t focus on the things that truly make us happy. We think of prosperity in a weird way. It’s not our things that make us wealthy — it’s our family and it’s our friends.” [For the record, studies show that health and the quality of personal relationships are the best predictors of personal happiness.]
  • Andrea Durbin, executive director of the Oregon Environmental Council, joined the chorus. “We need to make better choices every day so that our economy isn’t driving by our consumption habits,” she said. “Consuming less will not only help our environment but improve our quality of life.”
  • And, of course, the Dalai Lama took a very buddhist approach to the question of happiness: “Inner wealth is most important,” he said, “and that comes from human relationships. The ultimate source of a happy life and a peaceful life is within ourselves, not money.”
The Dalai Lama
The Dalai Lama actually has a great sense of humor. I like him.

A supplemental economy

As I listened to the panelists respond to this question, I was again reminded of the gift economy. This is a concept I first discovered while reading Kim Stanley Robinson’s science-fiction trilogy about the colonization of Mars. In the second book, Green Mars, the colonists grapple with constructing a new economy, one that’s neither capitalist nor socialist, but something more sustainable. As part of that, a sort of background gift economy emerges where individual outposts share their surplus with others. It’s an important part of a larger economic model.

There are some obvious pragmatic problems to the gift economy. It’s a utopian ideal that operates best in the rarified air of argument and hypothesis, and is less likely to succeed (let alone be implemented) in the real world.

But while such a system might not be practical for an actual global (or national or municipal) economy, a culture of gift-giving can be an excellent supplemental economy, a voluntary means of building mutual goodwill among family, friends, and neighbors. A gift economy builds social capital, bringing communities closer together.

Some examples:

  • If I have things that I do not use (as is often the case), and I pass these things on to people who will use them, I’m increasing their wealth and happiness at no cost to myself. This isn’t necessarily an altruistic action, but it is an action that improves the overall wealth of the community.
  • When I give, whether time or material goods, to another person, I’m not just improving her physical life. I’m also creating, for lack of a better term, positive mental energy. I’m fostering mutual goodwill.
  • When a group of people give together — especially when they give time — the result is often greater than the sum of the parts. Just as a group mentality can feed negative emotions and lead to negative consequences, the same group mentality can have positive results. After the Boston Marathon bombing, media outlets trumpeted the actions of the folks who rushed toward danger in order to help the wounded. My colleagues Nate St. Pierre and J. Money founded a group called Love Drop, a “a micro-giving network of people who unite as a community to help one person or family a month”. Etcetera.

Though I haven’t used it myself, I hear that FreeCycle is a great example of the gift economy. Here’s the group’s mission statement: “Our mission is to build a worldwide gifting movement that reduces waste, saves precious resources & eases the burden on our landfills while enabling our members to benefit from the strength of a larger community.”

Note: Here’s a short essay on how gift culture builds reputation among computer programmers.)

The extraordinary power of compound kindness

We don’t need to sacrifice our own interests to participate in the gift culture or to generate social capital. It’s not a zero-sum game. Often, we can create win-win situations that allow everyone involved to profit.

The older I get, the more I’m convinced of the importance of social capital.

Social capital comes from building a broad network of relationships, a network that you can draw upon to help yourself and help others. This isn’t networking in the smarmy, slimy sense, but in the authentic “I’m your neighbor and your friend” sense. A complex network of people will have thousands (millions!) of connections, creating a powerful web of support. (You can see great examples of this in Ben Franklin’s autobiography and in Keith Ferrazzi’s Never Eat Alone.)

These networks are usually built through everyday kindnesses. These actions compound (just like compound interest) to yield larger returns in the future.

The broader your circle of friends, the bigger your family, the better you know your neighbors, and the more involved you are in your community, the more social capital you have. (And the more social capital you contribute to others — it’s a reciprocal thing!)

“Building community is the adhesiveness that holds us together as a society. Without community, we break down into individual consumers.” — John Kitzhaber

A Store That Sells Financial Advice?

A good friend emailed me looking for financial advice the other day. Pam wrote:

A friend of mine is getting married this summer and…blah blah blah. [The main story/question in Pam’s email isn’t germaine to this article. Plus it’s private.]

My friend really wants a financial planner-type person to help them, but she realizes those people really are for people with money to invest (and ultimately pay the financial planner) and her issue is a shortage of money.

Are there neutral party, financially educated people to advise those who are trying to make good decisions but need some help to see all the implications? Where should she look?

Responding to Pam, I was reminded of a business I wanted to start several years ago, just after I sold Get Rich Slowly. At that time, I had a number of friends and family asking for financial advice. It occurred to me that there was a market for a new kind of financial professional. Here’s what I envisioned:

  • I’d open a storefront in a small space in some sort of high-traffic area like a strip mall.
  • My store would sell personal-finance related material, including a library of high-quality books, magazines, and software. (Yes, I know the market for PF software has now vanished.)
  • The store would also offer workshops and classes about personal finance topics, including budgeting and investing.
  • One special focus of the store would be financial education for children. Another would be entrepreneurship.
  • The main feature of the store would be financial advice. People could drop in and/or make an appointment to chat with me about their financial problems. I’d listen to their situation, and then offer suggestions.

As I was writing to Pam this morning, I realized that this idea excites me even more today than it did four years ago. My skillset is well-suited to a business like this. I’d love to give it a go. There are, however, some problems.

  • First, I’m wary of the legal implications. I’d do my best to give sound financial advice, but what if a person took my advice (on investing, for example) but then lost a bunch of money. What’s my liability? Worse, what if they did not take my advice but still blamed me for losing a bunch of money. What then?
  • I’ve never owned a storefront before, and I’m not sure how much it would cost to run a place like this. (This is a minor concern, though.)
  • I’d love to offer my services for free and only charge for books and software, etc. In reality, this model probably wouldn’t work. I don’t need to make a lot of money with this venture, but I do need to make enough to break even. And, ideally, I’d make enough to live on.
  • I’m fortunate to have a free and easy lifestyle right now, one where I’m able to do what I want when I want. If I had a store, I’d have to be present when the store was open. (This could be solved by just being open whenever I wanted, but then that creates headaches for customers.)

I like the idea of creating and running some sort of “money store”, but I’m not ready to actually do anything about it. Maybe I should do some research. I could find out the legal ramifications of giving financial advice. I could figure out what sorts of products I could offer. I could learn how much it would cost to lease a space for the store.

Who knows? Maybe a couple of years from now, you’ll be able to walk into a store called Get Rich Slowly in your neighborhood…

Note: Do businesses like this already exist? Where do you find them? If you were Pam, where would you send her friend for financial advice?

Ask the Readers: Finding Personal Health Insurance?

Today, I’m going to do something I’ve never done before. I’m going to use this blog as a means to do research for a forthcoming article for Entrepreneur magazine.

Your Money

I’ve been writing the monthly “Your Money” column for Entrepreneur for 2-1/2 years now, and it’s a lot of fun. It’s a chance for me to hone in subjects with laser-like focus. If you’ve read my stuff at Get Rich Slowly, some of the articles might be familiar. But I also get to cover new topics (like building a team of financial advisors).

The column is also fun because it’s a vastly different process than the one I’m used to. With blogging, there’s almost instant gratification. For instance, I’m writing this piece at 8:12 on a Thursday morning. It’ll be finished and online in about ten minutes. Nobody else will review it; I’ll just post it and let readers respond. Which you will. I’ll have feedback in half an hour.

With the magazine, however, there’s a long turnaround. My current article, for instance, is on peer-to-peer lending. I started doing research for that piece in early October, at the end of my trip to Turkey. I submitted the piece in early November. My editor polished the piece, it went to print, and it finally found its way online at the end of February. There’s one comment on the article. This article about that article may get dozens of comments.

So, as I say, it’s a different beast.

Anyhow, this is all a tangent. The real reason I’m writing today is to recruit your help for the article that will appear in the June issue of the magazine. I’m writing about how to find health insurance when you’re on your own.

Personal Health Insurance

There are a lot of perks to being an entrepreneur. When you work for yourself, you control your destiny: you pursue a project of passion while setting your own hours and working without a boss. But there are drawbacks too. Sure, you set your own hours, but you’re often working far more than you ever imagined. Many entrepreneurs are lonely, too, spending most of their days in isolation. And let’s not forget medical insurance!

In fact, I’d argue that medical insurance is currently one of the biggest barriers to entry for would-be entrepreneurs. I have several friends who are ready to leave their jobs to start their own businesses, but they can’t. They can’t afford the more than $1000 per month in medical insurance for their families.

Here’s a direct quote I jotted down from one friend last week:

If it weren’t for health insurance, people would be free to do so many things. My husband is tied to his job because we can’t afford to be without coverage. Even with health insurance, we pay a shitload of money for medical costs.

For many families, health insurance costs as much as housing.

In my own case, I’ve had to make some tough choices. When I was married, I was covered under Kris’s health insurance. I took it for granted. Now that I’m on my own, I carry an individual policy with a high deductible. That protects me from catastrophic crises (like a car crash), but I pay out of pocket for routine care. And I’m discovering that even routine care can cost a fortune.

Last week, for instance, I visited my allergist to discuss my rampant hay fever. The half-hour office visit cost me $250.50. The two-minute “surgery” to send a fiber-optic cable through my sinus passages cost $530. And the nasal spray the doctor prescribed to fight my symptoms cost $138.32 for fifteen doses. All told, I spent nearly $1000 to get temporary relief from my tree allergy. Next time, I’ll probably choose to suffer.

Or maybe it’s time to change my policy. I pay $144 a month, but I receive almost nothing in return. Maybe I need to bite the bullet, to pay $300 a month (or more) but have comfort in the knowledge that it won’t cost me $1000 every time I need to get allergy relief.

Share Your Story

So, here’s how you can help me. Do you pay for your own health insurance? Have you in the past? What sorts of advice can you offer other folks who need to do the same thing? If you’re willing to share your story (or to help others find affordable options), leave a comment on this article. And if you’re willing to let me chat with you for my article, be sure you use your real email address when commenting so that I can contact you.

I think there are a lot of folks out there who struggle with affordable health insurance, and this is a chance for us to help them. Let’s do it!

Note: Past GRS articles on this subject include Hunting for Health Insurance (which chronicles my search for health insurance last spring) and Health Insurance Options for the Self-Employed.

How to Travel the World (Without Spending a Lot of Money)

This is a guest post from Matt Kepnes, who writes about travel and more at Nomadic Matt. His advice has been featured in The New York Times, CNN, The Guardian UK, Lifehacker, Budget Travel, BBC, and Yahoo! Finance among others. Kepnes is the author of the just-published How to Travel the World on $50 a Day.

When I first stumbled across Get Rich Slowly, I figured J.D. didn’t travel much. Or if he did, he didn’t mention it often on the site.

But as we’ve gotten to know each other, I’ve been excited to discover that he travels frequently. He’s hiked the Inca Trail, spent time in Turkey, and I hear he’s making big plans for a European trip with his girlfriend at the end of March.

As a travel writer and someone whose personal mission is to get others to travel more, I’m excited. Seeing people travel makes me smile.

Crossing the 4950-meter pass near Salcantay
J.D., crossing a pass near Salcantay, Peru

Blinded by Marketing

Since I write about travel, I field a lot of questions about the practicality of seeing the world. People always tell me, “I want to travel more, but I can’t afford it. It’s too expensive.” But you know what? It’s not.

Forget what you’ve read in magazines and seen on TV. Travel can be very inexpensive. The reason you believe it’s unaffordable is because of marketing. Giant resorts have advertising budgets to match; small hotels do not. If all you’ve ever heard of is posh resorts, that’s what you’re going to believe travel is about. It’s hard to unlearn a lifetime of mass marketing.

Discouraged by the perceived cost, many people don’t travel. But if you really stop to think about your destinations, you can see they don’t have to be expensive. After all, locals don’t hundreds each day to live at your desired destination. (Just as you don’t spent tons of money to live your everyday life.)

Just like me, J.D. and thousands of others have found that when you make traveling a priority, instead of being discouraged by prices, you can work around them. In doing so, you get to see behind the curtain and discover travel isn’t expensive.

How to Make Travel Affordable

What are your priorities in life? Maybe it’s travel, maybe it’s gardening. Whatever your priorities, don’t you do everything in your power to fulfill those desires? You cut out expenses in other areas of your life, rearrange your schedule, research the hell out of it, and do whatever it takes to make your dreams happen. You make your dreams happen.

That kind of prioritizing is what happens when people want to travel more. (J.D. would call this conscious spending.)

“Well,” you might say. “That’s easier said than done, Matt. Flights and everything still cost money.”

You’re right. Even if travel is your highest priority, without money and a plan, it’ll never happen. To make that dream come true more quickly, here are five financial tips to make your next trip happen sooner.

Separate needs from wants
Before you travel, you’re going to need to save. Nothing in life is free. There are many ways to cut expenses, but one thing that really helped me was separating my wants from my needs. A need is my electric bill; a want is Starbucks. By categorizing my expenses, I could cut out the unnecessary expenditures and really watch my travel fund grow. If I didn’t need it, I didn’t spend money on it. Before I knew it, I’d saved enough money to travel.

A reader of mine recently saved over $14,000 while working a minimum wage job as a fry cook. If he can do that, so can you.

Making Lomo Saltado

Think outside the box
Want to visit Europe but can’t afford Paris or Italy? Head to Eastern Europe, where prices are cheaper. Want a tast of the tropics but Fiji’s too far and Costa Rica’s too touristy? Head to Nicaragua, which has beautiful weather and lower prices. Visit Cambodia instead of Thailand, or see South Korea instead of Japan.

There are always cheaper and safer alternatives to the world’s top travel destinations. We think of the big names first because they’re always talked about; there are just as many great places out there that you haven’t heard of and don’t have the crowds.

Game the system
Travel hacking is the best way to make luxury trips affordable. Travel brands offer so many ways to gain loyalty points that you can easily rack up tens of thousands without ever having to travel. This is an oft-discussed method of traveling but with good reason: It works extremely well.

If you really want to make your next trip happen sooner, get a travel-related credit card, sign up for a frequent flier and hotel loyalty system, and accumulate points like there’s no tomorrow. Moreover, don’t forget to sign up for newsletters so you can find out when there is an offer of 1000 points for taking a survey. Good resources for finding the latest point deals are:

J.D.’s note: Matt mentioned that I’ll soon be traveling to Europe, and he’s right. One way I’m going to keep costs down is by booking my flights using air miles I acquired by applying for a credit card two years ago. Another way is by using Airbnb to book lodging.

Think local
Travel doesn’t always need to be to some far off and exotic destination. Travel, to me, is about getting outside your comfort zone and exploring what you’ve never seen before. That could mean heading to Fiji or visiting the state next door.

If you don’t have a lot of time, driving somewhere for the weekend can give you a travel fix and still allow you to see something new. The U.S. is such a diverse country geographically that you don’t have to go far to feel like you’re somewhere entirely new.

Depend on the kindness of strangers
There are many hospitality websites that help travelers find free places to stay, as well as free guided tours around their destination. The most common are:

Couchsurfing is probably the most popular, but each of these websites connects you with locals who will give you a free place to stay. If you’re not quite comfortable with that, you can still use the sites to arrange meet-ups and plan social activities with locals.

Staying a while longer in one place? Try house sitting. Have a home? Swap it with someone in the destination you are going to visit! Both methods allow you to eliminate accommodation expenses and save more money.

Final Destination

Traveling is about goals. Like everything else in life, without a good plan, you’ll never reach your goals. My hope is that you can see there are many ways around the “high prices” of travel. It’s easier than you think to make travel happen. These five tips alone can cut hundreds of dollars from your trip — and they’re just a start.

I used to work an entry level job but I prioritized travel and made it happen. J.D. makes travel happen. Every year, millions of others make it happen. Now, I want you to take these tips and make it happen too!

House Hunting, part two: Finding a Place

It’s going to be an exciting and busy week for me.

Several weeks ago, I mentioned that I was looking to buy a new place to live. After a year of living in an apartment, I had a good idea of the place I wanted to find. Plus, the Portland real estate market seemed to have hit bottom — and had even begun to climb.

Throughout the fall, I worked with my real-estate agent, Andi (a former Get Rich Slowly reader). While she and I focused on finding a property that appealed to me, I struggled to find financing. Because interest rates were so low, I wanted to obtain a mortgage.

Ultimately, I gave up the idea of financing a home purchase. Despite the fact that I had ample cash in savings, no bank would give me a loan. I didn’t have enough income to qualify. If I wanted to buy, I’d have to pay cash. It took some time, but eventually I realized I was willing to do so.

Feels Like Home

During my first three months of house hunting, I’d seen one place that really appealed to me (but it sold in 24 hours, and while I was on the road), and had failed to find financing. It was frustrating.

After Christmas break, Kim and I spent a Sunday with Andi looking at condos in northwest Portland. The following week, Andi and I found a few more to explore. There were a couple I liked, but I didn’t fall in love with anything.

On my last day in Houston, I woke to find a listing I liked: a condo in a building where I’d already seen one unit. The first unit had appealed to me, but Andi and Kim both noted that it was directly underneath one of Portland’s major bridges, a bridge currently undergoing construction — and scheduled to be under construction for the next two years. “That’d be a deal-breaker if I were buying the place,” Kim said.

Sellwood Bridge construction

The new place was on the opposite side of the building. Plus, it was on the top floor. Plus, it was a little bigger. “I like this condo,” I told my host in Houston. “I’ll have to look at it when I get back to Portland.”

The real issue was that I’d mentally decided that I was only willing to spend $300,000. When I thought I could get financing, my budget was $400,000, but because I’d have to pay in cash, I’d mentally adjusted my price range. The new place was listed for $329,000. I decided to take a look anyhow.

The condo felt right almost immediately. Though staged in a plain and simple manner, it felt like home. I loved the view of downtown Portland (distant though it was) and the view of the river. I liked the layout. I liked certain features in the kitchen and bathroom. Most of all, there was something about the energy of the place that just felt right to me. “Let’s make an offer,” I told Andi.

Making an Offer

We spent a day trying to decide on a figure. I felt like $329,000 was a little too high. Plus, I’m a frugal fellow. We decided to submit a purchase price of $310,000.

As we were drafting our offer, we got word that somebody else was making a bid. “Crap,” I said. “What do we do?”

“That’s up to you,” Andi told me. “But in a competitive situation, you don’t want to be seen as lowballing.” In the end, we offered $325,000.

Our offer was refused.

Andi called me back with the news. “The sellers want ‘best and final’ offers by noon tomorrow,” she said.

“What does that mean?” I asked.

“It means they have at least two of you bidding on the place. Maybe more. And they want you to give them their best price now.”

I spent that evening doing a ton of research.

  • How much did other units in the building sell for?
  • What about other properties in the neighborhood?
  • What were prices like for other condos in other parts of Portland?
  • What could $325,000 buy me in a nice part of town? A lousy part of town?
  • What about $350,000?

I called Kim and talked things out with her. I also called my friend Mike, who owns investment properties in town, and asked his opinion. Then I sat down and worked out numbers. How much was I willing to pay for this place? What sort of difference did it make that I was paying cash instead of financing? (When you pay cash for a property, you’re essentially shifting your investment from one asset class to another. That’s a very important distinction.)

Ultimately, I decided I was willing to pay $342,000, so that’s what I offered.

My offer was accepted.

The living room of my condo unit

Failed Negotiations

From there, things got a little interesting. The home inspection was mostly glowing. We did not perform an appraisal because the sellers balked at that requirement when we submitted the offer. After we’d combed through the reports and documents, we found a handful of things that bugged us. (Plus, we were cranky about some sleight-of-hand regarding a storage unit.)

As the deadline for my decision approached last week, we took everything we knew about the property into account and reduced our offer to $336,000. The sellers refused to budge. They exercised a “take it or leave it attitude”. I asked Andi what that meant.

“We believe it means that the other offer (or offers) the sellers received were very near your offer,” she told me. “They don’t care if you back out because they have a backup offer that’s just as good. In fact, I think it’s likely that the backup offer may have been better. In any event, it’s almost certainly at least $336,000.”

In true J.D. fashion, I agonized over what to do. I could afford $342,000 instead of $329,000. My research indicated that the condo was worth the higher price. Plus, there was at least one other offer that supported that valuation, as well. Still, it bugged me to have to pay a premium for the place.

In the end, I elected to stick to my guns. I loved the condo, and I especially loved the location. I agreed to pay the $342,000.

Closing the Deal

On Tuesday, I’ll sign the documents for the purchase of the condo. On Friday, I should take possession.

It’s all very exciting, but it’s also a little scary. After months of moving in slow motion, the final part of the process happened at warp speed. “You don’t seem that excited about your new place,” Kim told me last Thursday. I am excited, but I’m also overwhelmed. I don’t feel like I’ve had time to process everything. I’ve done a lot of second-guessing myself.

But I also realize that if this doesn’t work out, it’s not a $342,000 mistake. The money hasn’t evaporated. It’s simply been shifted from stocks (which seem to be high right now) to real estate (which seems to be low right now). If there’s any mistake here, it’s on the order of $5000 or $10,000, not $342,000. (That’s still a lot of money, but not an obscene amount.) Besides, I’m certain there’s another buyer out there who’s willing to pay $336,000 for the place, and that gives me comfort.

Managing Mom’s Money

My mother is sixty-four. She’s struggled with mental illness for over a decade. About eighteen months ago, my family came to the tough conclusion that Mom needs constant care. Though she’s still relatively young, we found help for her at a nearby assisted-living facility.

Mom is doing better now that she has round-the-clock professional care. In the meantime, her three boys have been watching the homefront. We each have our own responsibilities.

Every month, for instance, I pay Mom’s bills. You’d be surprised at how much it costs to keep a house, even when nobody’s living in it. It costs $250 every month for electricity, maintenance, and more. Plus, it costs $4118 per month for the assisted-living facility and there are a host of medical expenses (even after health insurance).

It’s not the big expenses that worry me, though — it’s the little things that have a tendency to slip through the cracks.

When I took over Mom’s finances eighteen months ago, I found a number of odd recurring charges, both to her credit cards and her checking account. When I began calling the phone numbers listed on the statements, I discovered that most of these charges were different types of credit and life insurance.

I was able to cancel a couple of these charges by phone, but most required more effort and more detective work. In other words, they needed more time. Because time is scarce in my life, I put off the problem until the next month. And the next. And the next. Eventually, a year slipped by, during which time I continued to diligently pay these miscellaneous fees.

Finally, last Tuesday I took action. I spent an entire morning calling around in an attempt to cancel these charges. I didn’t have much luck.

While companies make it easy to obtain services, it’s much more difficult to quit. I’m certain they didn’t ask Mom for any sort of ID verification when she signed up, but in order for me to cancel, it’s not enough that I know her name, address, birthday, and Social Security number. It’s not enough that I have Power of Attorney. In order for me to cancel, they need me to sign forms, to fax copies of the Power of Attorney, or to have my mother herself grant approval. So, my work isn’t finished yet.

I also discovered that Mom has six different life insurance policies through two different companies. “I wonder why she has so many policies,” I said to my brother. “She doesn’t even need one — nobody relies on her income, so there’s no need for her to have it.”

“You have to be careful,” my brother said. He’s been getting Mom’s mail. “I’ve noticed that sometimes these places send what look like bills, but if you send in payment, you’re actually signing up for yet another insurance policy. It almost fooled me once. There’s no way Mom would have caught it. No wonder she has six different life insurance policies.”

Together, these life insurance policies are costing Mom nearly $1500 per year. And for what? We’re not sure. We can’t find any sort of documentation, so we don’t know what her coverage is.

After spending a few hours digging into her accounts, I was able to track down about $2500 of wasted annual expenses. No, that’s not a fortune, but it’s enough to pay half of one month’s rent at her assisted-living facility.

Mom doesn’t have a lot in savings. She only has about $25,000 total to her name. Because she’s the president and majority owner of the family business, she receives an income every month, which — coincidentally — comes to about $4000 after taxes. That’s enough to pay for her room and board.

The bottom line is that Mom isn’t even treading water financially. She’s losing a little bit every month. Her meager savings are being eroded by a variety of unnecessary small recurring expenses.

My experience has made me much more aware of the difficulties older people face when it comes to money. My mother believed she was doing the right thing when she signed up for an $8/month credit protection service through her credit card, but it never occurred to her that the $96/year was largely wasted. If she’d asked me, or if I’d talked with her, I could have explained that there are other, free ways to monitor her credit.

If you have aging parents, take the time to talk with them about money. Ask if they need help with their finances, if there are any questions you can answer. Volunteer to go through their credit card and bank account statements, searching for unusual charges and suspicious activity. Pull their credit reports to be sure everything’s as it should be.